In a Jan. 12 research note, Haywood Capital Markets analyst Kerry Smith reported that Nomad Royalty Company Ltd. (NSR:TSX; NSRXF:OTCQX) acquired an existing 0.21% net smelter returns (NSR) royalty on Artemis Gold's Blackwater gold project for US$3 million. The total consideration consisted of US$1.7 million in cash and 1,583,710 Nomad shares.
"The acquisition was very attractive as we value it at over two times the purchase price," Smith wrote. "Our preliminary analysis estimates the value of the royalty at about US$7.2 million, based on our long-term gold price of US$1,800 per ounce."
Smith described the NSR royalty and, as outlined in the 2020 prefeasibility study, the Blackwater mining operation in central British Columbia.
The project's reserves total 8 million ounces (8 Moz) of gold grading 0.75 grams per ton on average as well as 62.3 Moz of silver. Total Measured and Indicated resources, including reserves, amount to approximately 10.5 Moz. The royalty covers about 40% of the overall reserves at Blackwater, according to Artemis.
The royalty, defined by claim 515809, covers the deposit's southwest corner. "Mineralization dips to the northwest and is nearer to surface in the southwest corner, where the lower strip ratio starter pit is located," Smith wrote. "Consequently, this royalty would cover most of the production in the early years of mining from the starter pit."
Haywood estimates that the royalty will cover between 80% and 90% of total annual production from first phase to between 20% and 30% from the final phase.
As for annual production from Blackwater, it is projected to be 248,000 ounces (248 Koz) in the first five years, 420 Koz years 6 to 10, 442 koz years 11-17, before dropping to 189 koz years 18-23. Mill processing is expected to commence at 15,000 tons per day (15 Ktpd) for the first five years, then increase to 33 Ktpd in the sixth year and finally jump to 55 Ktpd in the 11th year. The initial open-pit operation is expected to run for 18 years and to be followed by processing of lower grade, stockpiled material for the next five.
The prefeasibility study outlines Blackwater as having a CA$3.05 billion after-tax, 5% discounted net present value and a 42% internal rate of return. As for a feasibility study on the project, Artemis plans to complete it by mid-2021. According to Haywood, construction could start by mid-2022, and the first gold pour could happen in about 2025.
Haywood has a Buy rating and a CA$2.25 per share target price on Nomad, the stock of which is trading today at about CA$1.04 per share.
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1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
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Disclosures from Haywood Securities, Nomad Royalty Company Ltd., January 12, 2021
Analyst Certification: I, Kerry Smith, hereby certify that the views expressed in this report (which includes the rating assigned to the issuer’s shares as well as the analytical substance and tone of the report) accurately reflect my/our personal views about the subject securities and the issuer. No part of my/our compensation was, is, or will be directly or indirectly related to the specific recommendations.
Important Disclosures
Of the companies included in the report the following Important Disclosures apply:
▪ Haywood Securities Inc. or one of its subsidiaries has managed or co-managed or participated as selling group in a public offering of securities for Nomad Royalty Company Ltd. in the past 12 months.
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